FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended April 30, 1999

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

           For the transition period from ____________ to ____________

                         Commission File Number - 1-6797


                             TEXFI INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                              56-0795032
(State or other jurisdiction of               (I.R.S. Employer
incorporation or organization)               Identification No.)

                  1430 Broadway, 13th Floor, New York, New York
                      10018 (Address of principal executive
                                    offices)
                                   (ZIP Code)

                                 (212) 930-7200
              (Registrant's telephone number, including area code)

                  Number of shares of Common Stock outstanding
                        at _________________ - 8,859,098

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X      No
                                      ----      ------
<PAGE>
                             TEXFI INDUSTRIES, INC.
                             ----------------------

                          QUARTERLY REPORT ON FORM 10-Q
                          -----------------------------
                      FOR THE QUARTER ENDED APRIL 30, 1999
                      ------------------------------------
                         PART I - FINANCIAL INFORMATION
                         ------------------------------

Item 1.  Consolidated Financial Statements

         Texfi Industries, Inc. (the Company") has prepared the consolidated
financial statements included herein, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The consolidated balance
sheet as of October 30, 1998 has been taken from the audited financial
statements as of that date. Certain information and note disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's latest Annual
Report on Form 10-K.

     The consolidated financial statements included herein reflect all
adjustments (none of which are other than normal recurring accruals) which are,
in the opinion of management, necessary for a fair presentation of the
information included. Operating results for the thirteen-week and twenty-six
week periods ended April 30, 1999 are not necessarily indicative of the results
that may be expected for the year ended October 29, 1999. The following
consolidated financial statements are included:

         Consolidated Statements of Income for the thirteen weeks and twenty-six
         weeks ended April 30, 1999 and May 1, 1998

         Consolidated Balance Sheets as of April 30, 1999 and October 30, 1998

         Consolidated Statements of Cash Flows for the thirteen weeks and
         twenty-six weeks ended April 30, 1999 and May 1, 1998

         Condensed Notes to Consolidated Financial Statements

                                       2
<PAGE>
                             TEXFI INDUSTRIES, INC.
                             ----------------------

                           CONSOLIDATED STATEMENTS OF
            OPERATIONS-UNAUDITED Thirteen Weeks and Twenty-six Weeks
                      Ended April 30, 1999 and May 1, 1998
    (DOLLAR AMOUNTS IN THOUSANDS EXCEPT NUMBER OF SHARES AND PER SHARE DATA)

<TABLE>
<CAPTION>


                                                      THIRTEEN WEEKS                         TWENTY-SIX WEEKS

                                                 1999                1998                1999                1998
                                           ------------------ ------------------- ------------------- ------------
<S>                                        <C>                  <C>                <C>                 <C>

Net sales                                    $  23,438          $  34,084           $  50,630           $  75,860

Cost and expenses:
   Cost of goods sold                           22,460             31,583              47,685              68,077
   Selling, general and administrative           2,233              3,155               4,580               6,027
                                           ------------------ ------------------- ------------------- ------------
Total                                           24,693             34,738              52,265              74,104

Operating (loss) income                         (1,255)              (654)             (1,635)              1,756

Other expense (income):
   Interest                                      1,947              2,132               4,167               4,286
   Impairment loss on joint venture                  -                  -                   -               1,154
   Other, net                                        -                (18)                  -                 (19)
                                           ------------------ ------------------- ------------------- ------------
Total                                            1,947              2,114               4,167               5,421

Net loss                                      $ (3,202)          $ (2,768)           $ (5,802)           $ (3,665)
                                           ================== =================== =================== ============

Weighted average number of shares            8,859,098          8,859,098           8,859,098           8,859,098
                                           ================== =================== =================== ============


Basic and diluted net loss per share          $   (.36)          $   (.31)           $   (.65)           $   (.41)
                                           ================== =================== =================== ============
</TABLE>

SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       3
<PAGE>
                             TEXFI INDUSTRIES, INC.
                             ----------------------

                           CONSOLIDATED BALANCE SHEETS
                       April 30, 1999 and October 30, 1998
                          (DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                            1999
                                                         (UNAUDITED)             1998
                                                      ------------------- --------------------
<S>                                                          <C>                  <C>
ASSETS
Current assets:
   Cash and cash equivalents                             $    269           $    162
   Receivables:
     Due from factor                                       17,575             22,530
     Trade, less allowances                                 4,048              7,829
     Other                                                     97                 85
   Inventories                                             11,185             13,346
   Prepaid expenses                                         1,366                964
                                                      ---------------- ------------------
Total current assets                                       34,540             44,916

Property, plant and equipment - net                        22,726             24,882

Property, plant and equipment held for disposal-net           347                368
Other assets                                                1,707              1,686
                                                      ---------------- ------------------

Total assets                                              $59,320           $ 71,852
                                                      ================ ==================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
   Current maturities of long-term debt                  $  1,200            $ 1,200
   Current maturities of subordinated debentures           36,725             34,371
   Accounts payable                                        19,943             22,503
   Other liabilities                                        5,152              3,833
                                                       --------------- ------------------
Total current liabilities                                  63,020             61,907

Revolving credit line                                      18,588             25,144
Long-term debt                                             11,359             11,766
Note payable                                                1,500                  -
Subordinated debentures                                         -              2,354
Other long-term obligations                                   166                192
                                                       --------------- ------------------
Total liabilities                                          94,633            101,363

Shareholders' deficit:
   Common stock, $1.00 par value                            8,859              8,859
   Additional paid-in capital                              25,534             25,534
   Accumulated deficit                                    (69,706)           (63,904)
                                                       --------------- ------------------
Total shareholders' deficit                               (35,313)           (29,511)
                                                       --------------- ------------------

Total liabilities and shareholders' deficit               $59,320           $ 71,852
                                                       =============== ==================
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       4
<PAGE>
                             TEXFI INDUSTRIES, INC.
                             ----------------------

    Thirteen Weeks and Twenty-six Weeks Ended April 30, 1999 and May 1, 1998
                 CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
                          (DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                THIRTEEN WEEKS                     TWENTY-SIX WEEKS

                                                               1999             1998              1999            1998
                                                            -------------- ---------------- ----------------- ------------------
OPERATING ACTIVITIES
<S>                                                            <C>            <C>                 <C>                <C>
Net loss                                                       $ (3,202)       $ (2,768)        $ (5,802)       $ (3,665)
Adjustments to reconcile net loss to net
   cash provided by operating activities:
     Impairment loss on joint venture                                 -               -                -           1,154
     Depreciation and amortization                                1,199           1,444            2,398           2,882
     Provision for losses on accounts receivable                      -               5              (45)              5
     Gain on disposition of property, plant and equipment             -              (1)              (1)             (2)
     Change in operating assets and liabilities:
         Receivables                                                999           4,309            8,769          12,449
         Inventories                                                363           1,949            2,161           3,012
         Prepaid and other assets                                  (360)            252             (564)         (1,185)

         Accounts payable and other liabilities                     460             956           (1,267)         (5,914)
                                                            -------------- -------------- ----------------- ----------------
Net cash (used in) provided by
Operating activities                                               (541)          6,146            5,649           8,736

INVESTING ACTIVITIES

(Return) purchases of property, plant and equipment                  58            (533)              17          (1,427)
Proceeds from sale of property, plant and equipment                   4             539               22           2,029
                                                            -------------- -------------- ----------------- ----------------
Net cash provided by investing activities                            62               6               39             602
FINANCING ACTIVITIES
Net payments on revolving credit                                   (718)         (3,890)          (6,556)         (6,528)
Issuance of note payable                                          1,500               -            1,500               -
Payments on long-term debt                                         (204)         (2,167)            (407)         (2,333)
Repurchase of subordinated debentures                                 -             (77)               -             (86)
Investment in joint venture                                           -             (25)               -          (1,179)
Capitalized loan costs                                              (41)            (71)            (118)           (413)
                                                            -------------- -------------- ----------------- ----------------
Net cash provided by (used in)
financing activities                                                537          (6,230)          (5,581)        (10,539)
                                                            -------------- -------------- ----------------- ----------------
Increase (decrease) in cash and cash equivalents                     58             (78)             107          (1,201)
Cash and cash equivalents at beginning of period                    211             311              162           1,434
                                                            ============== ============== ================= ================
Cash and cash equivalents at end of period                      $   269         $   233          $   269         $   233
                                                            ============== ============== ================= ================
</TABLE>

SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       5
<PAGE>
                             TEXFI INDUSTRIES, INC.
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 APRIL 30, 1999

1. Details of certain balance sheet captions at April 30, 1999 and October 30,
   1998 are as follows (in thousands):

INVENTORIES:
                                           1999                   1998
                                       ------------------ ---------------------
                                                 (IN THOUSANDS)
Finished goods                            $  2,582               $  3,338
Goods in process                             5,511                  6,299
Raw materials                                1,847                  2,294
Supplies                                     1,847                  2,017
                                       ------------------ ---------------------
Total                                       11,787                 13,948
Less reserves                                  602                    602
                                       ================== =====================
Inventories-net                           $ 11,185               $ 13,346
                                       ================== =====================
PROPERTY, PLANT AND EQUIPMENT:
                                           1999                   1998
                                       ------------------ ---------------------
                                                 (IN THOUSANDS)
Land and land improvements               $   2,220              $   2,220
Buildings                                    16,019                 16,019
Machinery and equipment                      60,968                 61,022
Construction in progress                        675                    638
                                       ------------------ ---------------------
Total                                        79,882                 79,899
Less accumulated depreciation                57,156                 55,017
                                       ================== =====================
Property, plant and equipment - net      $  22,726              $  24,882
                                       ================== =====================

LONG TERM DEBT:
                                           1999                   1998
                                       ------------------ ---------------------
                                                 (IN THOUSANDS)

Term loan with variable interest         $  12,559              $  12,966
Less current maturities                       1,200                  1,200
                                       ================== =====================
Due after one year                        $  11,359             $  11,766
                                       ================== =====================

SUBORDINATED DEBENTURES:
                                           1999                   1998
                                       ------------------ ---------------------
                                                 (IN THOUSANDS)
Senior Subordinated
 Debentures, 8-3/4%, due               $  34,371              $  34,371
 August 1,   1999
Subordinated Extendible
 Debentures, 11%, due April 1,
 2000 (Series C)                           2,354                  2,354
                                        -------------- ---------------------
Total                                     36,725                 36,725
Less current maturities                   36,725                 34,371
                                        -------------- ---------------------
Due after one year                      $     -              $    2,354
                                        ============== =====================

                                       6
<PAGE>


2.       At April 30, 1999, shares of common stock were reserved for possible
         issuance as follows:


          Stock options                                         858,099
          Stock options granted to entities
           affiliated with certain Company former
           executive officers.                                1,200,000
          1990 Executive Stock Purchase Plan                    283,892
          Directors' Deferred Stock Compensation Plan            57,153
                                                         ====================
          Total                                               2,399,144
                                                         ===================
         In May 1999, certain executive officers and entities affiliated with
         those officers sold their combined interest of the Company's common
         stock outstanding, including 1,200,000 options to acquire common stock
         to Whitecross Limited, a Bahamas holding company.

3.       At the end of the 1999 first fiscal quarter, the Company was in
         violation of the August 28, 1998 credit and term loan facility's debt
         service coverage ratio, minimum capital funds requirement, and
         non-payment of certain real property taxes and equipment operating
         leases. On February 25, 1999, the Company entered into a Forbearance
         Agreement which (a) revised the Borrowing Base definition to include a
         reserve for certain real property taxes, (b) replaced the debt service
         coverage ratio and minimum capital funds requirement with an EBITDA
         financial requirement, and (c) expanded periodic reporting
         requirements.

         The Forbearance Agreement was conditioned on the deferral of interest
         and principal payments due by the Company on its subordinated
         debentures and the receipt of $1.5 million in cash, representing the
         net proceeds of a subordinated loan made by Moore Assets International
         Limited ("MAI"). In addition, the Forbearance Agreement required that
         the net proceeds from the MAI subordinated loan be applied to the
         revolving credit line. The Company is prohibited from paying interest
         or principal to MAI during the term of the forbearance period.

         During its second fiscal quarter, the Company failed to (a) make the
         February 1, 1999 interest payment due on the 8-3/4% Debentures which
         approximated $1.5 million, (b) make the April 1, 1999 interest payment
         due on the Series C Debentures which approximated $153,000, and (c)
         honor the approximately $1.5 million in Series C Debentures put to the
         Company for redemption at the option of Series C Debenture holders.

                                       7
<PAGE>
         At the end of the 1999 second fiscal quarter, the Company was in
         violation of the February 25, 1999 credit and term loan facilities'
         Forbearance Agreement's EBITDA financial requirement. The Company
         failed to pay interest on the 8-3/4% Debentures and Series C Debentures
         and to honor the Series C Debentures put to the Company for redemption
         on April 1, 1999. On May 28, 1999, the Company negotiated Amendment
         Number 1 to the Forbearance Agreement and Amendment Number 3 to the
         Loan Agreement (the "Amendment"). The Amendment (a) reduced the credit
         facility from $40.0 million to $30.0 million, (b) revised the period
         end EBITDA financial requirements, (c) limited Borrowing Base
         availability on specific in-house customers' trade accounts
         receivables, and (d) increased applicable interest rate margins.

         The Amendment extends the initial Forbearance period by 120 days
         through September 28, 1999. The extension period is separated into two
         sixty day periods, each contingent upon the Company raising an
         additional $1.0 million in subordinated financing. The first extension
         period runs through July 28, 1999 pursuant to the May 28, 1999 receipt
         of $1.0 million in cash, representing the net proceeds of a
         subordinated loan made by MAI. In addition, the Amendment required that
         the net proceeds from this MAI subordinated loan similarly be applied
         to the revolving credit line. The Company is prohibited from paying
         interest or principal to MAI during the forbearance period.

         In May 1999,  certain executive  officers and entities  affiliated with
         those officers sold their combined  interest  approximating  23% of the
         Company's  common stock  outstanding to Whitecross  Limited,  a Bahamas
         holding  company.  In  conjunction  therewith,  Mr.  Richard L.  Kramer
         resigned  as a director  and  Chairman  of the Board of  Directors.  In
         addition,  Mr. William L. Remley resigned as Chief  Executive  Officer,
         director, and Vice Chairman of the Board. The Board named Mr. Andrew J.
         Parise,  Jr. as Chairman of the Board of Directors and Chief  Executive
         Officer in  addition to his  responsibilities  as  President  and Chief
         Operating  Officer.  Mr. Robert P. Ambrosini,  Executive Vice President
         and Chief Financial  Officer was appointed by the Board of Directors to
         fill a vacancy on the Board of Directors.

                                       8
<PAGE>
         In May 1999, the Company reached a settlement with Mentmore Holdings
         Corporation ("Mentmore"), an entity affiliated with certain of the
         Company's former executive officers whereby after August 1, 1998, the
         Company would receive management consulting services in exchange for
         office space and administrative services. The Company agreed to pay
         Mentmore approximately $56,000, representing the net amount due to
         Mentmore for management consulting services received and office space
         and administrative services provided prior to August 1, 1998. Mentmore
         deferred payment of this obligation without interest until July 31,
         1999.

4.       Basic net loss per share was determined by dividing net loss by the
         weighted average number of shares outstanding during each year. Diluted
         net loss per share reflects the potential dilution that could occur
         assuming conversion or exercise of all convertible securities and
         issued and unexercised stock options. Options to purchase shares of
         common stock were not included in the computation of diluted net loss
         per share because the options' exercise price was greater than the
         average market price of the common shares and, therefore, the effect
         would be antidilutive.

5.       The preparation of consolidated financial statements in conformity with
         generally accepted accounting principles requires management to make
         estimates and assumptions that affect the amounts reported in these
         consolidated financial statements and accompanying footnotes. Actual
         results may differ from those estimates and assumptions.

                                       9
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations

RESULTS OF OPERATIONS
---------------------

         Net sales for the thirteen weeks ended April 30, 1999 decreased to
$23,438,000 as compared to net sales of $34,084,000 for the thirteen weeks ended
May 1, 1998. This $10,646,000 (31.2%) decrease for the comparable thirteen weeks
periods resulted from lower sales volume at the Company's Blends operations
which was primarily attributable to unusually high imports of competing fabrics
and finished apparel from Asia into the United States' markets, specifically the
Company's missy and junior wear markets. Net sales for the twenty-six weeks
ended April 30, 1999 decreased to $50,630,000 as compared to net sales of
$75,860,000 for the twenty-six weeks ended May 1, 1998. This $25,230,000 (33.3%)
decrease for the comparable twenty-six week periods was created by the same
factors.

         For the comparable thirteen-week period, cost of goods sold, as a
percentage of net sales, increased 3.1% from 92.7% in 1998 to 95.8% in 1999. For
the comparable twenty-six week period, cost of goods sold, as a percentage of
net sales, increased 4.5% from 89.7% in 1998 to 94.2% in 1999. These increases
were caused primarily by fixed manufacturing costs increasing as a percentage of
net sales while the Company operated at a reduced schedule in order to avoid
increasing inventory levels.

         Selling, general and administrative expenses ("SG&A") increased from
9.3% to 9.5% as a percentage of net sales for the thirteen weeks ended April 30,
1999 as compared to the same period in 1998. SG&A as a percentage of net sales
for the twenty-six weeks ended April 30, 1999 rose to 9.1% from 7.9% during the
same twenty-six weeks in 1998. These increases reflect fixed costs that were
spread over the declining sales volume.

         Interest expense for the second quarter and the first twenty-six weeks
of 1999 remained consistent as compared to the first quarter of 1998.

         On December 18, 1997 the Company divested its interest in the joint
venture Rival Sport, LLC ("Rival") by selling its 50% ownership interest to an
entity affiliated with certain of the Company's then executive officers. The
Company received a secured $4.5 million ten-year note which bore interest at
5.0% per annum, payable at maturity. In the first quarter of fiscal 1998, the
Company determined that as a result of continued and anticipated future losses
at Rival and in light of the terms of the note there had been a permanent
impairment to its net investment in Rival and accordingly recorded an additional
$1.1 million impairment against its net investment in Rival, thus reserving the
full value of the note. Subsequent to the end of the first fiscal quarter 1999,
management was informed that the note may be of no collectible value.

                                       10
<PAGE>
Financial Condition:

         At April 30, 1999, the Company's working capital showed a deficit of
$28.5 million; a decrease of $11.5 million from October 30, 1998. This decrease
is due primarily to reductions in receivables of $8.7 million and inventory of
$2.2 million plus increases in current maturities of subordinated debentures of
$2.4 million which more than offset the combined decrease in accounts payable
and accrued expenses of $1.3 million and increases in prepaid expenses and cash
of $402,000 and $107,000, respectively.

         During the first fiscal half of 1999, operating activities generated
net cash of $5.6 million. This cash was generated as a result of the $5.8
million net loss adjusted for depreciation and amortization of $2.4 million,
together with a decrease in accounts receivable of $8.7 million and inventories
of $2.2 million which offset increases in prepaid and other assets of $564,000
and decreases in accounts payable and other liabilities of $1.3 million. Cash
flow from operations plus the proceeds from a note payable of $1.5 million
provided funds to repay long-term debt of $407,000, pay loan amendment costs of
$118,000 and reduce the revolving line of credit by $6.6 million.

         At the end of the 1998 second fiscal quarter, the Company was in
violation of its amended and restated March 15, 1996 credit facility's financial
ratios and minimum availability requirement. On June 5, 1998, the Company
entered into a Forbearance Agreement which was conditioned on the deferral of
management fees to an entity owned by certain Company executive officers and the
execution by this entity of a guaranty of secured obligations to the extent of
$1.0 million. In consideration, the entity received from the Company a ten-year
option to purchase 600,000 shares of common stock and an amendment of the
purchase price and option period related to that entity's previous option to
purchase 600,000 shares of common stock.

         On August 28, 1998, the Company entered into a $40.0 million credit
facility that expires on August 31, 2000. Net proceeds of $22.8 million from the
credit facility were applied toward repayment of the previous revolving credit
line. The credit facility is secured by a first lien on substantially all of the
Company's working capital assets and a second lien on substantially all of the
Company's property, plant and equipment. The second lien position is subordinate
to the security interests of Back Bay Capital, LLC securing the term loan
entered into on August 28, 1998 and as more fully described below. The credit
facility currently provides for the Company to elect interest rates based upon a
Eurodollar or prime interest rate plus applicable margin. In addition, the
Company may choose interest periods of 1, 2, 3 or 6 months with respect to its
Eurodollar rate elections. As of April 30, 1999, funds available under the new
credit facility, which represents the difference between the Borrowing Base as
defined by the facility agreement and the revolving credit line outstanding,
approximated $1.3 million.

                                       11
<PAGE>
Financial Condition-continued

         On August 28, 1998, the Company also entered into a $13.0 million term
loan with Back Bay Capital, LLC. The $12.6 million in net proceeds from the term
loan were applied toward the term loan ($8.0 million) outstanding under the
previously existing credit facility and revolving credit line ($4.6 million) of
the new credit facility. The new term loan is payable in 23 equal monthly
installments of $100,000 beginning October 1, 1998 with a balloon payment on
August 31, 2000. The term loan is secured by a first lien on substantially all
of the Company's property, plant and equipment, with a second lien on
substantially all of the Company's working capital assets. The second lien is
subordinate to the aforesaid revolving credit facility's security interest. The
term loan provides for interest on the unpaid principal balance at 12.0% per
annum payable monthly in arrears. There is an additional provision for 3.0% per
annum interest that is accrued and added to the unpaid principal balance monthly
in arrears.

         Both the credit and term loan facilities placed limitations on the
Company's rental expense, additional indebtedness, acquisitions, capital
expenditures, payment of subordinated debentures, and sale or disposal of
assets. The Company was required to maintain minimum capital funds and comply
with a debt service coverage ratio, each as defined by the facilities. In
addition, the Company was required to consummate an exchange offer with the
holders of not less that $27.1 million in principal of its 8-3/4% Senior
Subordinated Debentures due August 1, 1999 on or before April 30, 1999 on terms
as set forth in the facilities. However, the Company is unable to complete such
offer at the present time.

         At the end of the 1999 first fiscal quarter, the Company was in
violation of the August 28, 1998 credit and term loan facility's debt service
coverage ratio, minimum capital funds requirement, and non-payment of certain
real property taxes and equipment operating leases. On February 25, 1999, the
Company entered into a Forbearance Agreement which (a) revised the Borrowing
Base definition to include a reserve for certain real property taxes, (b)
replaced the debt service coverage ratio and minimum capital funds requirement
with an EBITDA financial requirement, and (c) expanded periodic reporting
requirements.

         The Forbearance Agreement was conditioned on (a) the deferral of
interest and principal payments due by the Company on any of its subordinated
debentures and (b) the receipt of $1.5 million in cash, representing the net
proceeds of a subordinated loan made by Moore Assets International Limited
("MAI"), a company organized under the International Business Companies Act of
the Commonwealth of the Bahamas. In addition, the Forbearance Agreement required
that the net proceeds from the MAI subordinated loan be applied to the revolving
credit line. The Company is prohibited from paying interest or principal to MAI
during the forbearance period.

                                       12
<PAGE>
Financial Condition-continued

         At the end of the 1999 second fiscal quarter, the Company was in
violation of the February 25, 1999 credit and term loan facility's Forbearance
Agreement's EBITDA financial requirement and failure to pay interest on the
8-3/4% Debentures and Series C Debentures and Series C Debentures put to the
Company for redemption on April 1, 1999. On May 28, 1999, the Company negotiated
Amendment Number 1 to the Forbearance Agreement and Amendment Number 3 to the
Loan Agreement (the "Amendment"). The Amendment (a) reduced the credit facility
from $40.0 million to $30.0 million, (b) revised the period end EBITDA financial
requirements, (c) limited Borrowing Base availability on specific in-house trade
customers' accounts receivables, and (d) increased applicable interest rate
margins.

         The Amendment extends the initial Forbearance period by 120 days
through September 28, 1999. The extension period is separated into two sixty day
periods, each contingent upon the Company raising an additional $1.0 million in
subordinated financing. The first extension period runs through July 28, 1999
pursuant to the May 28, 1999 receipt of $1.0 million in cash, representing the
net proceeds of a subordinated loan made by MAI. In addition, the Amendment
required that the net proceeds from this MAI subordinated loan similarly be
applied to the revolving credit line. The Company is prohibited from payming
interest or principal to MAI during the forbearance period.

         As of April 30, 1999, the Company had outstanding approximately $34.4
million of its Senior Subordinated Debentures due August 1, 1999 ("8-3/4%
Debentures"). The 8-3/4% Debentures, which cannot be called prior to their
maturity date, are unsecured obligations. These debentures contain covenants
that place limitations on the use of proceeds from disposal of assets and on the
incurrence of additional indebtedness and senior indebtedness (as defined in the
governing indenture) if such indebtedness would exceed stated ratios of
capitalization and earnings after such incurrence. The debenture definition of
indebtedness does not include revolver credit line borrowings or operating lease
obligations. The Company was prohibited from incurring additional indebtedness.

         In August 1998, the Company executed a Third Supplemental Indenture
whereby, the requisite 8-3/4% Debenture holders waived the restriction on the
incurrence of additional indebtedness with respect to both the August 28, 1998
Revolving Credit Facility and Term Loan and Security Agreements referred to
above and eliminated the monthly $600,000 sinking fund deposits which were
scheduled to begin on the last business day of September 1998.

         The Company failed to make the February 1, 1999 interest payment due on
the 8-3/4% Debentures which approximated $1.5 million.

                                       13
<PAGE>
Financial Condition-continued

         As of April 30, 1999, the Company had approximately $2.4 million of its
Series C Debentures due April 1, 2000. The annual interest rate of the Series C
Debentures may be adjusted at the sole discretion of the Company on each April 1
until maturity in 2000. The Series C Debentures are redeemable on April 1, 1999,
in whole or in part, at the option of the holder or the Company for the
principal amount thereof plus accrued interest through the date of redemption.

         The Company failed to make the April 1, 1999 interest payment due on
the Series C Debentures which approximated $153,000 and failed to honor the
approximately $1.5 million in debentures put to the Company for redemption at
the option of Series C Debenture holders.

         Management believes that cash flows from operations and funds available
under the current revolving credit line may not provide the Company with
sufficient funds to meet its fiscal 1999 cash needs, assuming no significant
improvement in current market conditions or interest rates. Management,
therefore, intends to explore various alternatives to the need for additional
working capital, including the possibility of filing for a reorganization under
the United States Bankruptcy code and /or raising additional capital from third
parties. Because the Company's recurring losses from operations and net capital
deficiency raise substantial doubt about its ability to continue as a going
concern, the report of Ernst & Young LLP, the Company's independent auditors, on
the Company's 1998 consolidated financial statements including an explanatory
paragraph to that effect.

Forward Looking Information:
----------------------------

         Statements contained in the foregoing discussion and elsewhere in this
report that are not based on historical fact are considered "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are based on management's present assumptions as to
future trends, and changes in current economic trends, prevailing interest
rates, availability and cost of raw materials, laws affecting the Company's
business and similar factors could affect the validity of such assumptions.

                                       14
<PAGE>
                           PART II. OTHER INFORMATION
                           --------------------------


Item 6.  Exhibits and Reports on Form 8-K
-----------------------------------------

     (a) Exhibits

         Exhibits to this report are listed in the accompanying
        index to exhibits.

     (b) Reports on Form 8-K

         No reports on Form 8-K were filed during the quarter
        ended April 30, 1999.

                                       15
<PAGE>
                                   SIGNATURES
                                   ----------

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                              TEXFI INDUSTRIES, INC.
                                   (Registrant)


Date:  June 21, 1999           By:/S/Robert P. Ambrosini
                                   ---------------------------------
                                     Robert P. Ambrosini
                                     Chief Financial Officer and
                                     Executive Vice President
                                    (Principal Accounting Officer)

                                       16
<PAGE>
                             TEXFI INDUSTRIES, INC.
                             ----------------------
                                INDEX TO EXHIBITS
                                -----------------

*3(a)(1)   Restated  Certificate of Incorporation of Registrant dated August 13,
           1969,  filed as Exhibit  (3)(a)(1) to  Registrant's  Form 10-K Annual
           Report for the fiscal year ended October 31, 1980.

*3(a)(2)   Certificate  of  Amendment  of  Certificate   of   Incorporation   of
           Registrant  dated  March 16,  1972,  filed as  Exhibit  (3)(a)(2)  to
           Registrant's  Form 10-K  Annual  Report  for the  fiscal  year  ended
           October 31, 1980.

*3(a)(3)   Certificate  of  Amendment  of  Certificate   of   Incorporation   of
           Registrant  dated  March 27,  1978,  filed as  Exhibit  (3)(a)(3)  to
           Registrant's  Form 10-K  Annual  Report  for the  fiscal  year  ended
           October 31, 1980.

*3(a)(4)   Certificate  of  Amendment  of  Certificate   of   Incorporation   of
           Registrant  dated May 19, 1986,  filed as Exhibit 4.4 to Registrant's
           Form S-8 Registration Statement (No. 33-14697).

*3(a)(5)   Certificate  of  Amendment  of  Certificate   of   Incorporation   of
           Registrant dated March 20, 1987, filed as Exhibit 4.5 to Registrant's
           Form S-8 Registration Statement (No. 33-14697).

*3(a)(6)   Certificate  of  Amendment  of  Certificate   of   Incorporation   of
           Registrant  dated  September  28, 1987,  filed as Exhibit  4(a)(6) to
           Registrant's Form S-2 Registration Statement (No. 33-16794).

*3(a)(7)   Certificate of  Designations  of Registrant  dated November 20, 1987,
           filed as  Exhibit  4(a)(7)  to  Registrant's  Form  S-2  Registration
           Statement (No. 33-16794).

*3(a)(8)   Certificate of Designations of Registrant dated March 8,1988 filed as
           Exhibit 4(a)(8) to Registrant's Form S-2 Registration  Statement (No.
           33-20131).

*3(a)(9)   Certificate of Designations of Registrant  dated August 4 1988, filed
           as Exhibit 4(d)(9) to Registrant's Form 10-Q Quarterly Report for the
           fiscal quarter ended July 29, 1988.

*3(b)(1)   Bylaws of Registrant,  filed as Exhibit 4.6 to Registrant's  Form S-8
           Registration Statement (No. 33-14697).

*3(b)(2)   Amendment  to Bylaws  of  Registrant,  filed as  Exhibit  4(b)(2)  to
           Registrant's Form S-2 Registration Statement (No. 33-16794).
<PAGE>
*3(b)(3)   Amendment to Bylaws of Registrant  adopted by  Registrant's  Board of
           Directors  on  January  18,  1991,   filed  as  Exhibit   3(b)(3)  to
           Registrant's  Form 10-K  Annual  Report  for the  fiscal  year  ended
           November 2, 1990.

*3(b)(4)   Amendment to Bylaws of Registrant  adopted by  Registrant's  Board of
           Directors   on  August  31,  1994,   filed  as  Exhibit   4(b)(4)  to
           Registrant's  Form 10-Q Quarterly Report for the fiscal quarter ended
           July 29, 1994.

*3(b)(5)   Amendment to Bylaws of Registrant  adopted by  Registrant's  Board of
           Directors  on  September  7,  1994,   filed  as  Exhibit  4(b)(5)  to
           Registrant's  Form 10-Q Quarterly Report for the fiscal quarter ended
           July 29, 1994.

*4(a)(1)   Indenture between Registrant and Rhode Island Hospital Trust National
           Bank,  Trustee,  with a copy of Subordinated  Debentures due April 1,
           1995, Series A,  Subordinated  Debentures due April 1, 1995, Series B
           and Subordinated  Extendible  Debentures due April 1, 2000,  Series C
           attached, filed as Exhibit 4(f) to Registrant's Form S-2 Registration
           Statement (No. 33-32485).

*4(a)(2)   Indenture  dated  September 8, 1993 between  Registrant and The First
           Union National Bank of North Carolina,  Trustee,  with copy of 8-3/4%
           Senior  Subordinated  Debenture due August 1, 1999,  filed as Exhibit
           4(c)(2) to  Registrant's  Form 10-Q  Quarterly  Report for the fiscal
           quarter ended July 30, 1993.

*4(a)(3)   First  Supplemental  Indenture  dated as of March 10,  1995,  between
           Registrant  and  First  Union  National  Bank of North  Carolina,  as
           Trustee,  filed as Exhibit 4(a)(1) to  Registrant's  Form 8-K Current
           Report as of March 15, 1996.

*4(a)(4)   Second  Supplemental  Indenture  dated as of March 15, 1996,  between
           Registrant  and  First  Union  National  Bank of North  Carolina,  as
           Trustee,  filed as Exhibit 4(a)(2) to  Registrant's  Form 8-K Current
           Report as of March 15, 1996.

*4(a)(5) Tripartite  Agreement dated as of August 14, 1998, between  Registrant,
         First Union National Bank,  formerly known as First Union National Bank
         of North Carolina,  as Initial  Trustee,  and Norwest Bank,  Minnesota,
         National Association,  as successor Trustee filed as Exhibit 4(a)(5) to
         Registrant's  Form 10-Q  Quarterly  Report for the fiscal quarter ended
         July 31, 1998.

*4(a)(6) Third  Supplemental  Indenture  dated as of August  28,  1998,  between
         Registrant  and  Norwest  Bank,  Minnesota,  National  Association,  as
         successor  Trustee filed as Exhibit 4(a)(6) to  Registrant's  Form 10-Q
         Quarterly Report for the fiscal quarter ended July 31, 1998.

                                       18
<PAGE>
*4(b)(1) Specimen  Common  Stock ($1 par value)  certificates,  filed as Exhibit
         4.01 to Amendment No. 2 to Registrant's Form S-1 Registration Statement
         (No. 2-41653).

*4(d)(1)   Amended and Restated Loan and Security  Agreement  dated December 19,
           1997 to the Credit  Agreement dated March 15, 1996 among  Registrant,
           as Borrower,  the  Financial  Institutions  referred to therein,  and
           BankBoston,  N.A., as Agent filed as Exhibit 4(d)(14) to Registrant's
           Form 10-K for the fiscal year ended October 31, 1997.

*4(d)(2)   Forbearance  Agreement  dated  June  5,  1998  among  Registrant,  as
           Borrower,   the  Financial  Institutions  referred  to  therein,  and
           BankBoston, N.A., as Agent, filed as Exhibit 4(d)(15) to Registrant's
           Form 10-Q filed for the fiscal quarter ended May 1, 1998.

*4(d)(3)   Forbearance Agreement Extension dated July 21, 1998 among Registrant,
           as Borrower,  the  Financial  Institutions  referred to therein,  and
           BankBoston, N.A., as Agent, filed as Exhibit 4(d)(16) to Registrant's
           Form 10-Q filed for the fiscal quarter ended July 30, 1998.

*4(d)(4)   Forbearance   Agreement   Extension   dated  August  21,  1998  among
           Registrant,  as  Borrower,  the  Financial  Institutions  referred to
           therein, and BankBoston, N.A., as Agent, filed as Exhibit 4(d)(17) to
           Registrant's  Form 10-Q filed for the fiscal  quarter  ended July 30,
           1998.

*4(d)(5)   Loan and Security  Agreement dated August 28, 1998 among  Registrant,
           as Borrower,  the  Financial  Institutions  referred to therein,  and
           BankBoston, N.A., as Agent, filed as Exhibit 4(d)(18) to Registrant's
           Form 10-Q for the fiscal quarter ended July 30, 1998.

*4(d)(6)   Term  Loan  and  Security  Agreement  dated  August  28,  1998  among
           Registrant,  as Borrower and Back Bay Capital  LLC,  filed as Exhibit
           4(d)(19) to Registrant's Form 10-Q filed for the fiscal quarter ended
           July 30, 1998.

*4(d)(7)   Ledger Debt Payment Agreement dated August 28, 1998 among Registrant,
           as Borrower and the CIT  Group/Commercial  Services,  Inc.,  filed as
           Exhibit  4(d)(20) to  Registrant's  Form 10-Q for the fiscal  quarter
           ended July 30, 1998.

*4(d)(8)   Forbearance  Agreement dated February 25, 1999 among  Registrant,  as
           Borrower,   the  Financial  Institutions  referred  to  therein,  and
           BankBoston,  N.A.,  as  Agent,  and Back Bay  Capital  LLC,  filed as
           Exhibit  4(d)(13) to  Registrant's  Form 10-K  Annual  Report for the
           fiscal year ended October 30, 1998.

                                       19
<PAGE>
*4(d)(9)   Subordinated  note dated  February  26, 1999 between  Registrant,  as
           payor,  and Moore  Assets  International  Limited,  filed as  Exhibit
           4(d)(14) to  Registrant's  Form 10-K Annual Report for the year ended
           October 30, 1998.

*4(d)(10)  Amendment Number 1 to Forbearance Agreement and Amendment Number 3 to
           Loan Agreement dated May 28, 1999 among Registrant,  as Borrower, the
           Financial Institutions referred to therein, and BankBoston,  N.A., as
           Agent,  and  Back  Bay  Capital  LLC.  Filed as  Exhibit  4(d)(1)  to
           Registrant's Form 10-Q for the fiscal quarter ended January 29, 1999.

* Incorporated by reference to previous filing.

                                       20